The Australian government has announced that it will be offering grants to divide AU$128.4 million between telecommunications and internet service providers (ISPs) to cover the costs caused by upfront compliance with the newly passed data-retention legislation.

The Data Retention Industry Grants Program, announced by Australian Communications Minister Mitch Fifield and Deputy Prime Minister Warren Truss on Thursday, will see a single funding round for telcos to apply for.

"The program delivers on the government's commitment to make a financial contribution to service providers' upfront data-retention costs, and includes support for smaller providers," Fifield and Truss said in a joint statement.

"The design of the program has benefited from consultation with the telecommunications industry, particularly through the implementation working group."

The Telecommunications (Interception and Access) Amendment (Data Retention) Act 2015, passed by the Australian government in March, came into effect in October. It will see customers' call records, location information, IP addresses, billing information, and other data stored for two years by telcos, accessible without a warrant by law-enforcement agencies.

Australia's self-described peak body for Australian internet users, Internet Australia, has applauded the introduction of the grants program, but said it does not go far enough to cover the costs incurred by ISPs.

"Internet Australia welcomes the release of the Data Retention Grants Program," Internet Australia CEO Laurie Patton said in a statement to ZDNet.

"However, we are concerned that it has taken so long for this to occur. Our ISP members have had to incur considerable costs without knowing what, if any, compensation they might receive. We remain concerned that the amount allocated ($128 million) is well short of the likely total costs as estimated by our ISP members and by the government's own advisor, PwC.

"ISPs are unlikely to absorb the shortfall, so consumers can be expected to be slugged with what can best be described as an Internet Tax in the form of increased access fees."

"[There is a] very real prospect of ISPs going out of business if they are not adequately reimbursed for the costs of implementation and the ongoing operating costs incurred in complying with this questionable law," Patton said in September.

"There is a risk that some, perhaps many, of the smaller ISPs will simply go out of business as a result of this new law. This is especially unfortunate for rural internet consumers who rely on local ISPs because they offer a specialised and personalised service.

"At the very least, the government needs to commit to funding the costs incurred by ISPs if it insists on retaining this onerous law."

Telco industry group the Communications Alliance published a survey the day data-retention legislation came into effect, revealing "a low state of readiness" among telecommunications providers for the new data-retention laws, with only 16 percent expecting to be compliant in time.

Comms Alliance's survey was completed by 63 telcos by October 9, with 36.51 percent of respondents revealing they were "not confident at all" on understanding what data the law requires them to retain and for how long, with only 11.11 percent "very confident" -- and 83.87 percent admitting that they would not be fully compliant with the obligations once they came into effect.

In relation to the costs associated with the scheme, telcos were split almost 50-50 on whether they requested from the government partial or full reimbursement of expenses incurred as a result of fulfilling data-retention obligations.

Less than a week out from the start date of the regime, telcos remained uncertain on what the costs imposed by setting up a system would amount to: 10.17 percent said less than AU$1,000; 8.47 percent pointed toward between AU$1,000 and AU$10,000; 32.20 percent suggested AU$10,000 to AU$50,000; 25.42 percent said AU$50,000 to AU$250,000; 11.86 percent said AU$250,000 to AU$1 million; 6.78 percent suggested between AU$1 million and AU$10 million; and 5.08 percent said it would cost them more than AU$10 million.

The government had previously announced in its 2015 Budget in May that it would allocate AU$131.3 million to the scheme, with Communications Alliance CEO John Stanton saying at the time that this amount was predicted to cover between only one-third and half of the estimated cost to ISPs.

"All providers are still waiting to hear from government as to how it will apportion the AU$131.3 million that has been pledged in assistance to partially meet the set-up costs that service providers -- and, ultimately, their customers -- are facing as a result of the regime," Stanton said.

"The government has indicated it will consult with industry in coming weeks on how to apportion the subsidy and this remains an urgent task, as service providers are now having to commit to investment decisions without knowing how much of that spending will remain unfunded.

"In light of the survey results, the onus remains on government to work constructively with industry -- and not rush to enforcement -- over coming months to help providers come into line with what is proving to be a very challenging and somewhat confusing impost on the industry."

Applications to receive funding under the government's grants program are due by 5pm AEDT on February 23.

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